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In our weekend digest, we summarize the best pieces published from the working week. These can be read in full by clicking on the link over the name/ticker.

Editor’s Picks

Boris Johnson Resignation Implications

Phil ran through some of the likely impacts on stocks, currencies and bonds in the aftermath of UK PM Boris Johnson announcing his resignation to the country earlier this week.

The Value of Buy and Hold over time

Once again, if the market is a passive way for you to increase your savings and wealth (rather than it being your main focus), index funds will pay greater than individual stock picking. 

Diversify across several economies and sectors. The US offers the S&P500 and Nasdaq. The UK offers FTSE100. You could also move into sector focused indexes such as the Russell 3000 Growth Index. 

Individual stock picking should be a minority in your portfolio.

Finding Cheap Value Stocks

Over a much longer period of time, since the early 1800’s, value stocks have beaten growth stocks by 3.25% per year. But in recent history, growth stocks have beaten value. Take a value investor like Warren Buffett, he has underperformed against the S&P 500 index for the 5, 10 and 15 years ending 2020.

The two Vanguard ETFs of value vs growth can be compared to see how it performed against each other since 2005. There are a few things to note about the charts. Firstly, value exceeded growth during the financial crisis in 2008. As the economy continues with concerns with inflation and a possible recession, value stocks could be the choice for these turbulent times. 

Secondly, value held up much better against a falling market. The Vanguard Growth ETF has fallen nearly 31% from highs in November. The Vanguard Value ETF has only fallen 11% from the same time period.

Stocks –

Sutro Biopharma

On June 27th, the company announced that they would be entering into a strategic worldwide collaboration with Astellas Pharma to advance novel immunostimulatory Antibody-Drug Conjugates (iADCs). 

Sutro will receive an upfront payment of $90M to develop iADCs for three biological targets and may be eligible to receive up to an additional $422.5M in development, regulatory and commercial milestones for each product candidate, plus royalties.

JP Morgan and Morgan Stanley

Despite the prospects of rising interest rates, shares of JPMorgan Chase and Morgan Stanley have gotten punished over the past seven months. And that’s because interest rates are not the only metrics investors are watching. Earlier this year, the yield curve inverted, which typically indicates a recession is on the horizon. Inflation is also an issue which has already caused a noticeable slowdown in several areas of the economy.

GameStop

ameStop has been a retail favourite for some time, and trades more on speculation and broader market sentiment than company specific factors. So for those that are wanting to get involved, the stock split is a good thing.

The lower price will make investing more accessible. It also means that for leveraged plays, or Option structures, investors can get a larger exposure to the company than before the split. As a disclaimer, we aren’t advocating leverage, it’s a choice for each one to make if they are comfortable taking it on.

FX – 

Why EURUSD At Parity Is Just A Number

EUR/USD is down 12% year to date, with 4.5% of that move coming in July so far. The move has accelerated to the downside in recent weeks.

Apart from the momentum trading, there are some valid reasons for the dip. One of them is the continued rise of natural gas prices. This hurts the Eurozone in particular, with the damage perhaps not even over yet. If Russia become more aggressive and turn off the taps as it were on Nordstream 1, the bloc could struggle even further with energy needs.

The interest rate differential is another driver here. The US Fed raised rates by 0.75% in June, with another 0.75% hike due at the next meeting. The ECB haven’t made a move yet, but have signaled a 0.25% hike later in July. It’s clear to see two different stances here on monetary policy. For investors wanting yield, it makes sense to sell EUR, buy USD.

To find individual disclaimers on specific stocks, please read the specific article.
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